Service Charge Modeling for RERA, Dubai
Service charges in Dubai are applicable to all types of properties in the city. It is a recurring fee that is paid by owners or landlords, for the maintenance of communal areas. Various aspects that include maintenance, cleaning, security staff and landscaping are covered in service charge. The method of applying service charges are governed by guidelines from RERA, Dubai’s Real Estate Regulatory Authority.
Service charges may not be the same for every owner; it varies depending on factors that include the size of the unit, the permitted use of the unit and certain standards that must be maintained by particular unit owners.
For developers, a good service charge model ensures that the charges are levied on an accurate and systematic basis, and in compliance with RERA requirements.
- Understanding the project
- Understanding data sources, gaps, and data validation requirements
- Analyzing the mix of units
- Study of adjacencies – related developments or other projects which share overall costs
- Discussion of timelines
- Finalizing responsibilities from the sides of client and consultant
Market Research & Data Analysis
- Obtaining cost data from the client
- Discussions regarding the cost data
- Verification of supporting documents and quotations provided by the client
- Completion of research for missing data
- Validation of any assumptions and data sources with the client
- Finalization of the basis of allocation for each cost
- Identifying similar developments in terms of:
- Profile of the property
- Size of the property
- Mix of usage
- Obtaining service charge information for the comparable properties
Resource-Based Cost Allocation
- Tabulating all costs and internally finalizing basis of allocation for each of the costs
- Identification of costs directly attributable based on the component (i.e., Residential / Retail / Commercial)
- Definition of criteria to develop a Weighted Criteria Assessment Matrix to ensure a fair and reasonable apportionment of common area costs and other services
- Finalizing Weighted Criteria Assessment Matrix
- Applying the basis of allocation to each cost element
- Allocation of costs within each component
- Preparing the financial model in Excel including all the cost elements
Discussion & Finalization
- Presenting the financial model in Excel including all the cost elements to the client, with the final service charge that has been arrived
- Discussions on the criteria weight ages, key assumptions, data estimations, etc.
- Comparison of service charge with comparable properties
- Finalization of the service charge model
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